Downselling – when is it worth using it?

Downselling is one of the sales strategies used to close deals, especially when a sales opportunity is getting away. In its simplest sense, down selling is offering cheaper alternative products or services… Downselling, in most cases, comes into play only at the point when we assess that the customer is undecided about buying. The initial intention to buy at a higher price is important here. Only when that fails can a down-selling strategy be used.

What is the difference between downselling and cross and up-selling?

We can say that down-selling is the opposite of up-selling, a sales strategy focused on offering a more expensive version of a product or service. In the middle of these solutions is still cross-selling, which offers complementary, additional products that increase satisfaction with the service or product.

Each strategy will require a different approach, different sales techniques, and moments in the decision-making process.

Example of down-selling

Imagine a customer walking into an upscale clothing store, hoping to purchase a branded suit for a special occasion. However, after discussing his budget and style preferences with the salesperson, he will be offered a lower-priced sales option (this is where the moment of „sensing” a sales opportunity that is moving away is crucial) – a well-tailored suit from another brand that offers excellent quality at a more affordable price. The customer feels understood and appreciates the salesperson’s effort to find the right solution within his or her means. This positive experience leads to sales and builds a sense of loyalty.

Key elements of down-selling

The success of downselling consists of several key elements to ensure its effectiveness. You must understand the motivations, limitations, and needs of your audience. If you, as a company, look for and catch your customers’ concerns, it will be easier for you to take specific down-selling actions.

For example, a customer may visit a car dealership to buy a brand-new luxury SUV. As the sales process progresses, the salesman is certain that the transaction will not be possible due to budget and limited financing capacity. So he offers a certified pre-owned car in a similar configuration with a 12-month warranty. The sale closes at 30% less. The sales representative’s ability to understand the customer’s needs and suggest a suitable alternative helps the customer make a more informed decision. It builds trust and loyalty to the company/dealer.

Downselling can be seamlessly integrated into the sales process, use social selling, and even introduce elements of automation or AI. What will be important here is the timing and conditions that must occur for an alternative to be offered. The better and more effective the timing, the greater the chance of effective action.

Strengthening customer relationships through down-selling

One of the main advantages of downselling is its ability to strengthen customer relationships. Customers who feel understood are more likely to build trust and loyalty to a brand. By taking a personalized approach and offering cheaper alternatives, companies show that they value their customers and are willing to try to meet their needs. In the market, this practice is not common, and this is due to hard commercial restrictions and procedures, e.g. we can’t offer discounts, substitutions, „can’t be done,” „don’t have the capability,” etc. Flexibility is the key to downselling, and in some cases, it allows you to operate with higher margins on low-cost products.

Sometimes, downselling also paves the way for repeat business and positive referrals or recommendations. Loyal customers generate recurring revenue and act as brand ambassadors, attracting new customers. According to a study by HubSpot, 81% of customers trust recommendations from friends and family.

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Identify down selling opportunities

The first step to implementing down selling is identifying opportunities within your customer base. Analyze customer data, actively listen during sales interactions, and survey customers to understand their preferences, budget constraints, and buying behaviour. 

By understanding your customers’ needs and constraints, you can pinpoint the moments when down selling will be effective and provide the right value. This proactive approach ensures that down selling becomes an integral part of your sales process or digital marketing activities

For example, if you notice that a customer often adds relatively expensive products to the shopping cart but rarely finalizes the purchase, it could mean they have budget constraints. You can, for example, design a test to offer cheaper alternatives in a given group of products and test audience.

Good practices of down-selling

Start by making sure down-selling options are clearly presented and easily accessible to customers. This can be achieved through properly designed product or service catalogues, intuitive site navigation, or personalized recommendations based on customer preferences.

For example, if a customer is browsing a high-end product, you can display related sales options on the same page, clearly highlighting the benefits and savings. This way, customers can easily compare and make an informed decision. For catalogues, you should highlight alternatives and possible savings. In mobile app marketing, you can start with a needs analysis and collect data at the initial stage of using the app to easily personalise the offer.

Inject training into your sales teams so they understand the benefits of downselling. Equip them with the skills to communicate with customers, helping them navigate down selling options and guiding them toward the most appropriate solution. Don’t make the sales bonus dependent on the value of the sale – this can lead to a negative effect.

Effective communication is important in downselling. If you think of concerns like lower quality, you need a concrete answer, which can be an additional warranty, return time or availability of spare parts.

Analyze sales data, customer feedback and conversion rates to identify areas for improvement. You don’t need to implement a downsell strategy on all areas. Testing on selected assortments or audience groups will work better.

How to deal with customer resistance at down-selling?

Some customers may show a lot of resistance to offering downselling, seeing it as a compromise or a much lower value proposition. It is important to address these concerns in a transparent, nuanced way. 

One effective strategy is to gather testimonials from satisfied customers who have chosen cheaper options and achieved the desired results, outcomes, etc. It is worth collecting documentation and proving the quality of the recommended replacement. If we show savings not only now but also in the long term, we will increase the chance of closing the deal. 

Costlier products often have their own unique advantages, such as off-the-shelf availability or other colour versions. These types of perks can be very effective in communicating and closing deals.

They can be very effective in communicating and closing deals.

How to measure downselling effectiveness?

The KPIs that are examined in a downselling strategy are not significantly different from other business-marketing metrics. We can start with the conversion rates of downselling offers, customer satisfaction scores or revenue generated from downselling.

Conversion rates of downselling offers can indicate how well customers respond to cheaper alternatives. A high conversion rate suggests that customers find value in downselling offers and are more likely to purchase. On the other hand, a low conversion rate may indicate that downselling offers need to be improved, the target audience re-evaluated or the benefits communicated. Conversion rates alone are not enough. It will be important to analyze product returns, possible negative quality feedback, etc. simultaneously. Customer satisfaction scores can help companies understand to what extent their downselling strategies align with customer expectations. In this way, it is easier to identify which areas of downselling need improvement, e.g. excluding a particular product from the offer.

Is downselling worth implementing?

Downselling offers many benefits in a highly competitive market. It is one of the key steps to improve customer relationships, increase sales effectiveness, improve customer satisfaction and retention, and ultimately drive growth and scale.

Whether you run a small or large e-commerce business, downselling can offer a new opportunity to generate conversions while increasing customer satisfaction. The time to implement downselling is now!

The time is now.